Bear And Bull Traps — How To Determine Them?

Crypto market might be tricky sometimes. That’s why traders should be aware of different kinds of signals which may be determined on the graph. Let’s observe the definition of market traps and explore their nature. 

The bear and bull trap is a drastic change in the direction of price movements. Usually, such situations arise when the maximum or minimum cost values are in breakout, and during the price levels punches.

Usually in trading, a bull trap is when a trader purchases crypto thinking its cost will grow continuously, solely to watch it reduce sharply after reaching a brand new high. A bear trap is when people sell to create a temporary dip in the price of the assets. 

When punching a formation on the graph, the price actively moves in the desired direction, but at a certain point there is sharp price reversal and movement in the opposite direction, breaking the stop orders of the players in opposite positions.

This trap is used by large players to collect liquidity at a high price and sell it at a low price. However, you can simply detect this trap. It’s enough to pay attention to vertical volumes, transaction tape and cluster in the selected timeframe.

For example, in the case of a real breakdown of a strong resistance level, vertical volumes will grow strongly, the transaction tape will have a ton of large purchases, and the cluster will display a large number of purchases at a price above the punched level.

Trading newbies should avoid such traps in order to not to give their funds to the market.

Here we can see the example of a huge bull trap for BTC. In this case Bitcoin is confidently moving to the maximums update, but if you look at the volumes that are greatly reduced, there comes an understanding of the upcoming reversal.

The ability to identify signals on a graph definitely takes time. However, if you pay close attention to the behavior of the coin price and know what it means, it will be much easier for you to save your funds.

SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.